Following an eight-day, 83-cent rally, the natural gas futures market appeared to cool its jets early Wednesday as traders liquidated long positions ahead of Thursday’s storage report and the Nymex holiday Friday. At 11:40 a.m., the May contract had tumbled all the way down to $5.495 from Tuesday’s close at $5.653, but that turned out to be the low for the day.

After noon, the near-month quickly regained what it had lost and by the end of the day was up 2.4 cents to $5.677 not far from its $5.720 daily high.

A informal survey of industry observers conducted Wednesday morning by NGI yielded weekly storage expectations ranging from a 52 Bcf withdrawal to a 14 Bcf injection with an average of 16 Bcf withdrawal. The Energy Information Administration will release its weekly storage survey at 10: 30 a.m. EDT on Thursday. Several analysts quoted a common range of withdrawal expectations around 10-30 Bcf, which would be unusual for the second week in April. However, the market was surprised when the EIA reported a 9 Bcf withdrawal for the week ending April 4, and temperatures last week were even colder than the prior week.

Last year, the EIA reported a 15 Bcf injection and the five-year average is a 21 Bcf injection for the same week in April. Jay Levine of Advest Inc. is predicting a 20 Bcf withdrawal, but he said a more sizable drawdown is not out of the question. “A 30 Bcf or greater number would prompt a quick short-squeeze that could take us right back up to resistance in the $5.70-80 range.”

Helping to fuel the move lower Wednesday morning was sympathy selling with crude oil, which shuffled lower despite some supportive fundamental data of its own. According to the American Petroleum Institute, U.S. crude oil stocks dropped by a whopping 4.5 million barrels last week. However, because a figure of that magnitude had already been priced into the market, it was viewed as a reason for selling rather than buying, traders agreed.

Many also thought the EIA storage report had been factored into the market, but that apparently was not the case. However, a summer weather report sent out by Salomon Smith Barney meteorologist Jon Davis also may have added some late bullish pressure on prices. Davis’ forecast calls for normal to above normal temperatures across the United States.

On the upside, technical resistance is seen at the confluence of Tuesday’s $5.72 high and the $5.75 Fibonacci retracement off the February to April move.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.